Don’t Ignore Credit Card Debt And Just Consolidate

Ignoring your credit card debt is probably the worst that you can do. If you really want to remove your debt problems so you can live in peace, pretending it does not exist should not be one of your options.

There are so many things that will be affected when you refuse to acknowledge your card debt. First of all, the interest and late payment penalties will continue to pile up and grow your debt amount. If you started with $5,000, it can grow to $10,000 if you refuse to pay any amount towards it. Even if you stop using it, as long as it has a balance, the card debt will continue to grow.

Your card debt also ruins an important part in your life: your credit score. If you had plans of setting up your own business or buying a house, your credit card debt will keep you from reaching these goals. Your credit score reflects your attitude when it comes to your finances. Even your employment opportunities, rental option, business partnerships and loan interest rates will be compromised with a bad credit score.

Fortunately for you, there is a way to solve your credit card debt and that is to consolidate it. You have two options: pay down the debt through debt consolidation or reduce the amount through debt settlement.

Debt consolidation help restructure your debt payments so the balance is stretched over a much longer term. The goal here is to lower your monthly contributions without being penalized for it. Take note that you will still end up paying for everything that you owe so you have to make sure that your income can support it. There is a possibility of getting a lower interest rate with the new payment plan that debt consolidation will set up for you. That will decrease the monthly payments even further but do not bet all your savings on it.

If you need further reduction, you may be better off with debt settlement. This option involves negotiating with your creditors and convincing them that you are in a financial crisis. Explain to them how this crisis rendered you unable to keep up with your payments. It can be an illness or a recent job loss. Give them the details and let them know that you still take full responsibility for the debt. It’s just that recent events made it impossible for you to meet the minimum requirements of your debt. You will then offer to pay pennies for every dollar. If you and the creditor agree on a settlement price (e.g. .50 for every dollar), you only pay that percentage and have the rest forgiven.

While the latter option may seem like the better choice, know that your credit score will suffer because you will have to default on your payments. That is one of the ways to convince your creditors that you are in a crisis.

Choose between the two based on your financial capabilities. You can always grow your income so you can afford the first option. Just remember that your debts are your doing and thus you are responsible for completing its payments. Don’t ignore the problem that you created because this is one of those that will not go away on its own.